Electric car discounts are unsustainable, warns industry group

Industry discounts on electric vehicles are “unsustainable” as the number of new cars registered in the UK surpassed two million last year for the first time since the pandemic, a major automotive group has warned.

According to figures from the Society of Motor Manufacturers and Traders (SMMT), around 500,000 of new cars sold were electric.

SMMT chief executive Mike Hawes welcomed what he called “a very solid result amidst challenging economic and geopolitical headwinds”.

But electric car sales are still not growing fast enough to meet official targets, he said, warning that there is a growing gap between consumer demand and government targets.

He said rebates worth thousands per vehicle were “unsustainable”.

A total of 2,020,373 new cars were registered in 2025, the third consecutive year of growth and the highest total since the pandemic.

But it was still well below the 2.3 million sold in 2019.

Electric cars generated 473,340 new registrations last year, giving them a market share of 23.4%.

This was a significant increase from 2024, but was still below the government’s headline target of 28%, known as the Zero Emission Vehicles Directive (ZEV Directive).

The order states that automakers who fail to sell sufficient electric cars as a percentage of their total sales could face heavy fines.

However, there are concessions within the rules that will allow them to avoid penalties, for example by reducing the emissions of other vehicles in their fleet or by purchasing excess ’emission credits’ from manufacturers that exceed their own targets.

These ‘flexibilities’ were extended in April following intense lobbying by some manufacturers, while penalties for non-compliance were also reduced.

However, Hawes warned that car manufacturers are still having to make big discounts to sell enough electric models. SMMT estimates these rebates were worth more than £5bn last year, or around £11,000 for every electric vehicle sold.

Hawes said this was unsustainable, especially as manufacturers expected to hit a tougher target of 33% this year. He called on the government to bring forward a planned review of the ZEV Authority, which is due to take place in 2027.

“The number of battery electric vehicles (BEVs) sold is increasing,” he said. “The question is: At what cost?”

He suggested that such a review would need to look at factors that have changed significantly since the targets were first planned, including a significant rise in energy prices and high raw material costs that are making life even more difficult for automakers.

But he stopped short of openly calling for further dilution of the rules.

“Don’t get me wrong; the industry is not changing course,” he insisted.

“He needs to sell these vehicles because he’s invested so much in them. But you need to make sure the market more closely reflects the actual level of demand.”

Eurig Druce, UK group managing director of Stellantis, which owns brands including Vauxhall, Peugeot and Citroen, called for the review of the ZEV Directive to be postponed until earlier this year because “the UK is increasingly out of step with its position in Europe and the rest of the world”.

Speaking to the BBC’s Today programme, he said stepping up the review would give manufacturers “certainty” when making investment decisions and also help “consumers make the right choice for the cars they want to buy for their future”.

However, some commentators are more positive about the ZEV Mandate.

Colin Walker of the Energy and Climate Intelligence Unit, an environmental research group, welcomed the latest record figures.

“2025 has been another bumper year for EV sales, with almost one in four cars sold in 2025 being an EV,” he said.

“This policy will strengthen the UK’s second-hand market, where most of us buy our cars, and ease motorists’ cost-of-living concerns.”

Last year, the government introduced a number of measures to support the proliferation of electric vehicles.

These include: £1.3bn Electric Car Grant SchemeProvides up to £3,750 towards the cost of purchasing an electric vehicle, as well as significant funding for charging infrastructure

However, he also announced plans in the autumn budget Introducing a ‘per mile’ tax on electric vehicles – a measure designed to offset some of the reduction in fuel tax revenues caused by the switch to electric vehicles.

The independent Office for Budget Responsibility said the move would likely result in 440,000 fewer electric cars being sold over a five-year period.

“This is one of the challenges we see,” Hawes said.

“To have a technological shift like this, you need consistent, consistent and compelling messaging and support… Even announcing a tax specifically on electric vehicles would send a very contradictory message to consumers.”